Central Bank Publishes Macro-Financial Review II 2017

• Brexit continues to pose a major risk to the Irish economy
• Infrastructural deficits in housing, transport and communications could hinder domestic growth while increasing spending to address these deficits could cause overheating pressures
• Demand for housing continues to outstrip supply while many households remain vulnerable to debt and interest rises

Speaking at a press conference to launch the review Sharon Donnery, Deputy Governor, Central Banking, noted the strong performance of the Irish economy but warned of the risks posed by Brexit.

“The Irish economy is forecast to expand at a healthy pace in 2018, while employment growth is expected to remain strong. The UK’s decision to leave the EU poses significant risks to the Irish economy. Changes to trading agreements between the EU and the UK could have a negative impact on export demand and cause disruption to supply chains,” she said.

Deputy Governor Donnery also highlighted the risk posed by infrastructural deficits but cautioned that addressing these risks in the short-term could cause the Irish economy to overheat.

“Infrastructural deficits, particularly in the housing sector, could hinder medium-to-long term growth prospects, although increased spending to ameliorate these deficits could generate overheating pressures in the short run,” she said.

With a debt level of 142% of disposable income, Ms. Donnery said that the Irish household sector remains “highly indebted” and warned that the sector was susceptible to increases in interest rates.